Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
"k" is used to designate 1,000's and "mm" is rarely used in my circle, but no problem. I new what you meant.
How many retirees sell there home when retiring? I don't know for sure, but this link from a quick check references a study indicating that 30% of retirees move in a 12 year period. This they call a significant number. I think it's more significant (and rather makes you foolish to make any claims of an "absurd statement") that this study shows that 70% of retirees do not move.
Downsizing yes, I covered that. Regardless, as my thread said, it's not 100% wealth accumulation because that downsized house won't be free. Cheaper yes.
When you said most of us you didn't me everyone? Where you speaking of a specific group of people? That might have helped to include. If you were referring to only people who are currently retired it makes sense, in terms of people in general or people in this thread replying with figures it would not.
M is also in thousands especially when combined with MM, certainly in the wealth management field it's used a lot
How many retirees sell there home when retiring? I don't know for sure, but this link from a quick check references a study indicating that 30% of retirees move in a 12 year period. This they call a significant number. I think it's more significant (and rather makes you foolish to make any claims of an "absurd statement") that this study shows that 70% of retirees do not move.
The value of the retirees home is still part of their estate when they die. It can be sold by their heirs. A retiree can tap into their home through a reverse mortgage or HELOC.
The value of the retirees home is still part of their estate when they die. It can be sold by their heirs. A retiree can tap into their home through a reverse mortgage or HELOC.
All true...no argument.
Although a reverse mortage, etc. will not generate the total value either.
Quote:
Originally Posted by aus1ander
Net worth = assets - liabilities.
A house is a physical asset and has a market value. A mortgage is a liability. You can't pick a choose what you think is a real asset and whats not. For most people, owning a home is not a big contributor to net worth because of the routine use of 30 year mortgages and low down payments.
Yes of course. Hence my "theoretical" comment. My comment wasn't about financial reporting, but realistic appraisal's of personal retirement situations (which vary from person to person). The point was to people - don't put all your retirement eggs into the home equity basket.
Liabilities:
-Mortgage - $793k
-Student Loans - (note, we just paid off my wife's student loans at $45k) = $13,700
Total = $806,700
Net Worth = $880,300
Note: We make a good combined household income, which has more than doubled in the past 10 years. However, we live in the very expensive SF Bay Area and between our mortgage and daycare costs, its a stretch to max out our 401ks, much less add to our emergency funds and kid's 529 plans. How are we doing?
Liabilities:
-Mortgage - $793k
-Student Loans - (note, we just paid off my wife's student loans at $45k) = $13,700
Total = $806,700
Net Worth = $880,300
Note: We make a good combined household income, which has more than doubled in the past 10 years. However, we live in the very expensive SF Bay Area and between our mortgage and daycare costs, its a stretch to max out our 401ks, much less add to our emergency funds and kid's 529 plans. How are we doing?
I think you're doing pretty well. Your mortgage monthly payment won't increase with time and daycare expenses will disappear once your kids are in school. Hopefully your income will rise as well over time, allowing you to increase your 401k contributions.
My comment wasn't about financial reporting, but realistic appraisal's of personal retirement situations (which vary from person to person). The point was to people - don't put all your retirement eggs into the home equity basket.
But do people really use net worth as a tool for retirement planning? I look at it as more important for estate planning. Those are two very different things.
To me, all that matters at retirement is how I can live off my retirement investments (the deculumation phase) until I die. My house doesn't come into factor, except that I hope to not have a mortgage at that point.
But do people really use net worth as a tool for retirement planning? I look at it as more important for estate planning. Those are two very different things.
To me, all that matters at retirement is how I can live off my retirement investments (the deculumation phase) until I die. My house doesn't come into factor, except that I hope to not have a mortgage at that point.
Then you are doing the right thing!...Too many however are relying on the house value to get them through retirement. Very dangerous for many reasons.
This is the point I was trying to get across (not needed for you because you already get it):
"Recent research shows that many workers are counting on the equity in their homes to finance their retirements. Here are four reasons why that's risky:
- You have to live somewhere. Unless you plan to move someplace significantly less expensive, downsizing may not free up much cash after transaction costs. And of course you'll face higher real estate taxes if you stay in Florida because you'll lose your "Save Our Homes" exemption.
- You may not get the price appreciation you're expecting. Real estate prices run in cycles and can be very volatile, but over the past 40 years the return has been only a little better than investing in T-bills, according to a Fidelity Investments study. The recent run-up in prices was an aberration, not the new normal.
- Your equity may be spent. In the past two years, Americans have cashed out $622-billion in home equity through refinancing, according to Freddie Mac data. The more you owe when you retire, the less equity you'll have available to tap in retirement.
- Your timing may be bad. When you're ready to sell, market conditions may not be favorable. "
t
But do people really use net worth as a tool for retirement planning? I look at it as more important for estate planning. Those are two very different things.
To me, all that matters at retirement is how I can live off my retirement investments (the deculumation phase) until I die. My house doesn't come into factor, except that I hope to not have a mortgage at that point.
I'd use the home value in a retirement plan if the client expected to sell the home and move. Otherwise it's certainly a recommendation that could be made to a client if their retirement expectations are ahead of their retirement assets
I am always nervous when people include home equity as part of net worth. Sure, theoretically it is. It's an illusion. It gives people a skewed sense of security. For one thing - it's lack of liquidity. You can't simply turn around tomorrow and turn it into cash for emergencies. More importantly, for retirement: What are you going to do with your home - sell it and live in a tent? No, you still need a place to live.
Yeah, you can sell it and move to a smaller place, or a cheaper housing area, or in a retirement home, but that still replaces one asset with another, or different stream of expenses, and it will never net out to 100% wealth, maybe no wealth at all. Most of you will stay in your house until age makes it unable to manage yourself, or until death.
The point is - if you have one single resident and look rich on paper due to this home equity and nothing else planned for retirement - you aren't, and you are in trouble.
Quote:
Originally Posted by Dd714
I have no idea what you are talking about. This isn't about Bill Gates or stock or Forbes.
Are you on the right thread?
You are new here right?
Alright, you are saying that homes should NOT be counted as part of net worth because of "illusion" and "lack of liquidity"
Well I think that your 401K and stock investment should NOT be counted as part of net worth either!
Let's see:
Stocks are currently multiple times earnings; some companies as high as 500x earnings;
Stocks can instantly crash 50% as witnessed in 2007. So your $500K worth of stocks? It's an illusion. It could be $250K tomorrow.
Stocks have intraday fluctuations as high as 10-15%. So are you really worth X? It could be X times 1.15 or X times 0.85 even in the span of a day.
Stocks are at an all time high right now and many people are expecting a crash. Is your 500K in stocks really worth 500K?
If anything, because of the HIGH LIQUIDITY and HIGH VARIANCE, stocks should NOT be counted as networth and only REAL ESTATE should be counted as net worth.
You buy 200K in Lehman Brothers and CITI and tomorrow it bankrupts/diluted all shares. Your 200K is worthless.
Basically I applied your logic on stocks and therefore, nothing should be counted as networth.
Alright, you are saying that homes should NOT be counted as part of net worth because of "illusion" and "lack of liquidity"
Well I think that your 401K and stock investment should NOT be counted as part of net worth either!
Let's see:
Stocks are currently multiple times earnings; some companies as high as 500x earnings;
Stocks can instantly crash 50% as witnessed in 2007. So your $500K worth of stocks? It's an illusion. It could be $250K tomorrow.
Stocks have intraday fluctuations as high as 10-15%. So are you really worth X? It could be X times 1.15 or X times 0.85 even in the span of a day.
Stocks are at an all time high right now and many people are expecting a crash. Is your 500K in stocks really worth 500K?
If anything, because of the HIGH LIQUIDITY and HIGH VARIANCE, stocks should NOT be counted as networth and only REAL ESTATE should be counted as net worth.
You buy 200K in Lehman Brothers and CITI and tomorrow it bankrupts/diluted all shares. Your 200K is worthless.
Basically I applied your logic on stocks and therefore, nothing should be counted as networth.
You are wandering off-topic. You failed to address both the "illusion" and "lack of liquidity" nature of a real estate property and instead alluded to the temporary market value which applies just as much to a stock as it does to a real estate property. If your goal with the post was to apply the previously posted logic to stocks, you failed.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
